bankruptcy of the Silvergate bank, another earthquake in the cryptos

One of the main traditional banks supporting decentralized finance has just announced its liquidation. After a snowball effect, the US financial institution threw in the towel, left its customers on the floor and sparked a wave of panic in the crypto ecosystem.

Nothing goes right in cryptos anymore. On the night of March 8 to 9, 2023, the death knell sounded for the Silvergate holding company. Its parent company Silver Capital announced overnight, in a statementits intention to wind down its business and voluntarily liquidate Silvergate Bank For the first time in the short history of cryptocurrencies, the traditional banking sector is being directly shaken by cryptocurrencies. In a few words, a hard reset was applied to the 35 years senioritybillions in assets and 279 employees (end of 2021) of the banking institution.

Domino effect in crypto

The California bank facilitated exchanges between FIAT currencies (dollars, euros, etc.) and cryptocurrencies through its Silvergate Exchange Network. The payment network is now suspended. It was one of the few traditional banks that managed companies from the crypto world. Prior to FTX’s bankruptcy, Silvergate $12 billion on depositdivided among 1,677 clients, mainly institutional. In December 2022, there were only a few left $3.8 billion. In just a few weeks, $8 billion has evaporated.

Silvergate had requested a delay for the publication of its annual results ten days ago. A pessimistic index that professionals and individuals had noticed. In the process the Coinbase, or Gemini platforms or even the companies that manage Paxos or USDC turned away from Silvergate Bank. An icy wind out FUD (Fear, Uncertainty and Doubt) (fear, uncertainty and doubt) swept through the entire cryptosphere. Investors, burned by the Crypto Lunaover there celsius liquidationover there fall of the FTX platform or recently bankruptcy of Genesis Trading hurried to withdraw their bet. As always in the stock market, psychology had a disastrous accelerating effect on an already weakened player. As if that wasn’t enough for this dark series, the Silvergate Corporation stock price melted like snow in the sun for weeks. Close to 85% in three months. Silvergate’s price had known its price ATH (historic high) at $200 in 2021. From now on, the action is only worth it 2.5 miserable dollars… The banking industry had to sell its assets to cover the billions of dollars withdrawn since the FTX platform scandal.

See also  young people are still addicted to it but lose interest in Apple Glass
crash of bitcoin
Photo credit: igorigorevich/123RF

Dangerous contacts between FTX and Silvergate

The ship took on water from all sides, it was necessary to save the furniture. Silvergate preferred hara-kiri. Instead of allowing doubt and rumors about its activities, the financial institution declared its voluntary liquidation. The situation was untenable. Despite the vibrancy of crypto players and American liberalism, the many missteps of decentralized finance companies have led to a regulatory alarm clock. Several members of Congress are calling for more regulation. This desire to regulate a naturally decentralized industry is what worries investors.

And to top it off, an investigation has already been conducted on Silvergate Bank to understand its ambiguous relationship with FTX. According to the Wall Street Journal, Sam Bankman-Fried (boss of FTX) would have deposited the equivalent of $1 billion in this bank. However, crypto players seem to have learned lessons from the past. Instead of doubting for weeks. Silver Group put the kibosh on pretty early on. In his press release she promises that she would honor her customers by returning their deposits.

New Crypto Dive

After a catastrophic year 2022 in the cryptocurrency market, the year started to become much more optimistic. The price of Bitcoin, Ether and even altcoins gained momentum again. Small crypto investors all hoped this would come to an end bloody bear market. The most optimistic bet on a running of the bulls, a Bitcoin to $100,000 and more in a few months. Like a soufflé, hope quickly vanished. Between gloomy macroeconomic indicators and increasingly restrictive institutions, the market is bearish. By taking a step back, the situation is not so dark.

See also  Pasqal raises $100 million to build neutral atom-based quantum computer

Admittedly, thousands of small savers are suffering from the stock market steamroller. But we can also see this bankruptcy as thecleaning up the market. Not to mention cryptocurrency scams, there are still plenty of bad apples in web 3.0. “But when there’s a domino effect, the effects are becoming less and less important. So overall, I think the industry will be better. But there will be other breakdowns“. It is not a saying of an Eastern philosopher, it is what Changpeng Zao (better known by the abbreviation CZ), the boss of Binanceto Bloomberg TV in November 2022. Other players already affected by this liquidation, Circle, and its USDC stablecoin, are exposed to $3.3 billion… The tremors in crypto tectonics shouldn’t stop there. Just wait.

Ana has been with businesscraze for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesscraze team, Ana seeks to understand an audience before creating memorable, persuasive copy.